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Meetup 1-options vs stocks

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Meetup 1-options vs stocks

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In this session, we will build a case to invest in options. We will see how it fundamentally differs from stock investing or derivative trading. We will discuss how options can act as an insurance and safe guard our portfolio.

We will go through a group exercise which will reinforce basic concepts of buyer, seller and the important role of a market maker.

In this session, we will build a case to invest in options. We will see how it fundamentally differs from stock investing or derivative trading. We will discuss how options can act as an insurance and safe guard our portfolio.

We will go through a group exercise which will reinforce basic concepts of buyer, seller and the important role of a market maker.

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Meetup 1-options vs stocks

  1. 1. Stock trading Vs Options EXPLORING FUNDAMENTALS Amit Shanker contactamipro@gmail.com
  2. 2. Disclaimer Various sections of the "Brainstorm Options Investing and Stock valuations" Meetup Group web-site (and subsequent discussions in our real-life Meetups) will naturally incorporate topics such as Stocks, Options, investing and many other related areas. Our intention is to provide a platform to share information between our members for educational purposes only, however at no time is this intended to be financial planning or investment advice nor should it be regarded as such. It is recommended that independent advice be sought from a suitably qualified and licensed investment adviser if you require assistance with your financial situation. Your ongoing membership of our meetup is conditional upon you agreeing unequivocally that the Organizer, Assistant Organizer(s), all other Members, their Guests and other associates of this Meetup Group are never to be held responsible or liable for any loss or damage (including indirect, special or consequential loss or damage), whether financial or otherwise, arising as a result of your use of (or reliance upon) information gained from or via this web site or any subsequent Meetups or other gatherings which you may choose to attend. Furthermore, no responsibility or liability is accepted for any information, products or services that may be contained in other web sites which may be linked to this web site.
  3. 3. Introduction • Do you have any experience with trading Options? • According to you, what is a good yield? • What has brought you to this meetup and how can we make it successful?
  4. 4. Exercise: Money laying chicken • Manages to lay £30 every week • Yield varies depending on how well the chicken is fed • Food and maintaining it costs: £20 per month (which could go up as per inflation) • Known to live up to 7-8 years You have the opportunity to buy a chicken which is 6 months old “How much would you pay?”
  5. 5. Buffet Quotes “Rule No. 1: Never lose money. Rule No. 2: Never forget rule No.1” “Risk comes from not knowing what you are doing.” “If past history was all that is needed to play the game of money, the richest people would be librarians.” Page 44 In 2010 and 2009, gains on equity index put option contracts were $172 million and $2.7 billion, respectively. Under many of the contracts, no settlements will occur until the contract expiration dates, many years from now.
  6. 6. Investing in Shares BUY/SELL Rationale • Shareholder value driven by return and growth. Long term investors are bullish on the company’s growth and expect its earnings to grow y-o-y • The price one pays for purchasing shares is a multiple of company’s earnings • Short term directional traders use resistance- support levels to execute trades
  7. 7. Risks with Investing in Stocks • Time Risk: In the long-term , Stocks tend to perform better than cash. Timing of investment can turn out to be very important. • A Black Swann can wipe out all of your capital. You only have to look back at 2008 and see what transpired in the stock market. • Directional trading can be stressful and overnight positions taken by short term traders can cause sleepless nights. • Forecasting yield on investment is almost impossible. • Only source of regular income would be via Dividends.
  8. 8. How does Options help? • The right hedged investment made using options means you will not risk more than 5% of your capital. Right adjustments can make your investment risk-free! • Presents opportunity to earn regular income during a bull and bear market. • Market crash will make you smile when analysts keep discussing about the grim economic situation.
  9. 9. Demo Account (Started 29th March 2016)
  10. 10. What we have lined up? ◦ Options Basics ◦ Pricing Option Contracts ◦ Option Spreads ◦ Formulating Basic Strategy ◦ Discussing Real trade examples
  11. 11. Beer O’ Clock

Notes de l'éditeur

  • I appreciate the effort each one of you has made to attend this meet up and we’ll try to make it informative, enjoyable and worthwhile for each of us.
  • Discuss the process of arriving at the right cost. Who are the interested participants in the transaction – Buyer(s), Seller(s), Speculator(s) – bullish & bearish, Insure the chicken? Introduce Rule of 72
  • What are the risks with pure Stock trading?

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